Victoria\'s Secret Question # 1-

Victoria's Secret

QUESTION # 1- PROFILE the COMPANY in TERMS of ITS:

MISSION STATEMENT

ITS MAJOR PRODUCTS or SERVICES

FINANCIALS- WHAT IS the COMPANY'S REVENUES, ASSETS, NET INCOME?

WHO ARE the COMPANY'S MAJOR COMPETITORS?

Limited Brands, of which Victoria's Secret is the dominant brand globally, has defined its mission statement as follows (Investor Relations, 2007), "Limited Brands is committed to building a family of the world's best fashion brands offering captivating customer experiences that drive long-term loyalty and deliver sustained growth for our shareholders." Implicit in this mission statement is a multi-brand strategy that looks to deliver a highly unique, differentiated, and captivating series of experiences for customers to earn their loyalty, with profitability being the result.

Limited Brands (LTD: NYSE) is a publicly-traded corporation that is one of the leading fashion, apparel and fragrance companies in the United States, with significant operations in hundreds of product lines. The more dominant lines include apparel, cosmetics, lingerie, fashion product, fragrances, personal products sold through their branded stores globally. The company's brands include Aura Science, Bath & Body Works, Henri Bendel, the Limited, the White Barn Candle, and Victoria's Secret.

Limited Brands had been supported two apparel businesses, Express and the Limited Stores, and due to pricing and margin pressures in the retail sector, sold Express stores earlier this year. The Limited Brands is organized along its three strongest brand areas, which include its apparel business, Bath & Body Works, and Victoria's Secret. As real estate is integral to Limited Brands' retailing operations, there is a separate division specifically dedicated to the management of the company's investments in store locations and leases.

A financial analysis of Limited Brands is presented in Figure 1, showing both revenues and operating income from 2003 to the most recently available financial period, FY 2007. Victoria's Secret has grown from 37% of total revenues in 2003 to 48% in 2007, an 11% increase. Victoria's Secret has also offset declining sales in the Apparel sector of the business. Victoria's Secret contributed 70% of Net Income in 2003 growing to 81% in 2007. This analysis is based on the accumulated filings of the company with the Securities and Exchange Commission (2007).

Figure 1: Limited Brands Financial Analysis

Revenues

Apparel

Victoria's Secret

Bath & Body Works

Operating Income

Apparel

Victoria's Secret

Bath & Body Works

Competitors to Victoria's Secret include American Eagles' Aerie stores, which have begun a campaign to take market share, Liz Claiborne Inc., the Gap, and smaller boutique shops that feature lingerie and undergarments for young women. What contributes to the continued growth of Victoria's Secret both in market share and profitability is their exceptional grasp of their target customer base, the effective use of in-store promotions and plenty of rooms for trying on bras, and many opportunities to get an Angel credit card. Specifically on the point of why Limited Brands designs stores with many dressing rooms is that the company has found that once a bra has been tried on, the same customer, 70% of the time either purchases that bra or another one (Marketing Leadership Council, 2002).

QUESTION # 2- DESCRIBE the 5 FORCES of the COMPANY'S MAIN INDUSTRY, IE:

RIVALRY AMONG COMPETING SELLERS

THE STRENGTH of BUYERS

THE STRENGTH of SUPPLIERS

THE THREAT of NEW ENTRANTS

SUBSTITUTE PRODUCTS

The five forces that comprise Dr. Porter's model are industry competitors, pressure for substitute products, bargaining power of suppliers, bargaining power of buyers, and the influence of potential entrants. Figure 1 shows the Porter Five Forces Model graphically, drawn from the original mention of this model by Dr. Micheal Porter of Harvard University, Porter (1979). Each of these areas is now discussed in bullet form in the following series of sections.

Assessing Victoria's Secret Industry Competitors

The most potentially challenging competitor is American Eagles' Aerie Stores, followed by department stores that stock higher-end lingerie products.

Between the department stores and specialty boutiques, the latter is going to be more difficult to compete with long-term.

Further adding pressure to the competitive landscape is the role pricing is playing in much of the activity in the market, both from a department store and boutique standpoint.

Pressure from Substitute Products

Unlike mainstream women's lingerie and undergarments, Victoria's Secret has build their brand on the four core attributes of feminine, sexy, sophisticated and quality, which combine to create a highly unique identity.

With pricing pressure also bringing substitute products also into the market segments Victoria's Secret competes in, there is a continual need on the part of the company to monitor and critically evaluate new market entrants. From this intelligence, Victoria's Secret has at times created counter-strategies to counter a competitor.

Bargaining Power of Buyers

The buyers, or consumers, find the branding of Victoria's Secret aligns with their specific self-image, have been very loyal and have a very high repurchase rate of products from stores and online. These buyers are very loyal as a result of Victoria's Secret management using the framework shown in Figure 2 for making branding decisions, (Marketing Leadership Council, 2002)

Figure 2: Decision-Making on Branding at Victoria's Secret

Bargaining Power of Suppliers

Due to the complexities of logistics and the supply chain and the highly seasonal nature of demand for fabrics, suppliers often have a major advantage relative to Victoria's Secret management.

Suppliers also have significant bargaining power as Victoria's Secret chooses to source products globally, and often must have several sources for the same type and consistency of fabric to fulfill demand. As a result, suppliers also have significant leverage on this point as well, especially when they realize from discussing market conditions with one another that Victoria's Secret has a fabric or material shortage.

Potential Entrants

The success of Victoria's Secret has attracted many potential contributors, many not with a parent company like Limited Brands which has the resources to fund new ventures that capitalize on the success of the dominant brand. What Victoria's Secret must begin doing immediately is complete their development of new store concepts including Pink and CO Bigelow, as their square footage on the main branded store has essentially been built out.

Department stores who are developing upscale clothing lines are also specifically focused on lingerie include Wal-Mart and JC Penny. While these department stores will find it difficult to match the core attributes of the Victoria's Secret brand which exemplifies the values of feminine, sexy, sophisticated and quality.

QUESTION # 3- WHAT ARE INDUSTRY'S KEY SUCCESS FACTORS (KSEs) i.e, WHAT FACTORS ULTIMATELY DETERMINE a FIRM'S SUCCESS in the INDUSTRY?

The Key Success Factors (KSF) in the retailing of women's clothing in general and lingerie specifically include moving into adjacent product and services categories, creating new brands including Pink, CO Bigelow, and Intimissimi, and faultless execution of new product introductions. Taken together, these are the KSFs that matter most in the retailing of women's lingerie and will spell the difference between Victoria's Secret being able to continue growing into the future.

More strategically, the following are KSFs across lingerie as a global market. Market positioning, the ability to generate and sustain customer loyalty, the flexibility in supply chains to respond to competitive threats with price competitiveness, product quality, store location, product innovation and diversity, financial viability, and the ability to execute quickly on marketing strategies all form the foundation of strategically-based KSFs for the market Victoria's Secret competes in.

QUESTION # 4- PREPARE a SWOT (STRENGTH, WEAKNESS, OPPORTUNITY, and THREATS) CHART of the COMPANY

Strengths

Exceptionally strong understanding of their customer base and excellent systems and processes in place for taking their recommendations and either creating products from them or rejecting the ideas (Marketing Leadership Council, 2002).

Excellent Brand Recognition in the retail sector, specifically in luxury lingerie.

Proven ability to generate and sustain customer loyalty in the Victoria's Secret customer base both with credit card offers and encouraging trying on of apparel. The company's internal research shows that once garment has been tried on (specifically a bra) there are a 70% chance it will be purchased.

Continued growth in same-store sales and higher productivity per square foot of store space than in previous decades.

Weaknesses

Increasingly high inventories and challenges in managing their supply chain due to the breadth of the product line.

With strong sales in Victoria's Secret brand segment, there continues to be a shortfall of sales in Apparel and other dominant sectors of the business, leading to the sale of the Limited Express stores. This weakness also includes the poor performance of the apparel business as well.

Opportunities

Greater growth opportunities in the lingerie market globally through expansion into other westernized nations.

Growth of the Pink store concept. Focus on bra-only stores also increasing as a result.

High level of loyalty from their target market of women in their 20s is fueling the company with many excellent product development ideas.

Threats

Seasonality of sales has been in the past difficult to predict and act on, and this has lead to increased focus on supply chain costs and processes. Limited Brands continues to work on their logistics and supply chain inefficiencies, yet this area of seasonality continues to be a weakness.

Rapid price declines from lingerie produced in third-world nations and the growth of discounters selling knock-off products.

Shortages of key raw materials is also directly impacting the company's ability to accurately predict and respond to store demands for specific mixes of products.

QUESTION # 5- HOW HAS the COMPANY CHOSEN to COMPETE? WHAT ARE the ELEMENTS of ITS STRATEGY? e.g, LOW COST SUPERIOR CUSTOMER SERVICE, ETC)

Victoria's Secret has been very successful due to first the excellent execution of their branding strategy that stresses the values of being feminine, sexy, sophisticated and products of quality has worked very well for the company. In addition, the ability to quickly and successfully launch new products has greatly contributed to the company's success, in addition to the front-line strategies that are shown in Figure 3, Focus at the Front Line, (Marketing Leadership Council, 2002).